White Collar Criminal Defense Group

DOJ Announces New Focus On Prosecuting Individuals

After years of criticism that it failed to prosecute the individuals responsible for the financial crisis, the Department of Justice (“DOJ”) has announced changes to their internal guidelines to focus on the prosecution of individuals in corporate malfeasance cases. 

At an event at New York University School of Law on Thursday, Deputy Attorney General Sally Quillian Yates discussed an internal memo addressing the handling of corporate cases she had just issued to all of the department’s prosecutors and civil litigators.  The memo  outlines six steps that Deputy Attorney General Yates stated were designed to “ensure that all department attorneys . . . are consistent in using our best efforts to hold individual wrongdoers accountable.”

The first step addresses the conditions precedent for crediting a corporation for cooperating.  To receive credit, a corporation must now identify all individuals involved in the alleged misconduct – there will no longer be partial credit given for partial cooperation.  To emphasize this point, corporate plea agreements will include provisions requiring ongoing cooperation, with failure to do so being considered a material breach triggering revocation of the agreement or stipulated penalties.

The second step is an exhortation to both criminal and civil attorneys of the department to focus on individuals from the outset, rather than trying to build a case against individuals only after a civil inquiry against the corporation has concluded – the latter being an often daunting task given the passage of time and the much higher burden of proof in criminal cases.  To lend support to this second step, the third policy formalizes the lines of communication between civil and criminal attorneys to ensure both sides of the DOJ are discussing a given case from its inception.

The fourth and fifth steps appear to place additional restrictions on the resolution of corporate malfeasance cases in the face of parallel proceedings against individuals within the corporation.  If a case against an individual is still pending when the case against the corporation concludes, DOJ attorneys will have to provide a clear plan for resolving the related individual cases.  Additionally, if the DOJ attorneys decide to release the individuals in the related cases, they will need to obtain written approval to do so.

Finally, the sixth step advises attorneys to broaden their focus in civil enforcement to not only target corporations that can pay substantial monetary sanctions, but individuals as well – regardless of whether those individuals have the resources to pay significant judgments.

The past decade has seen important changes made to DOJ’s Principles of Federal Prosecution of Business Organizations (USAM 9-28.000 et seq.).Most of the changes were designed to allow corporations to obtain credit for cooperation without being complicit in the denial of important rights of individual officers and employees, including the right to counsel and the right against self-incrimination.  The calls for those changes, which recognized the precarious position of corporations under investigation and the collateral consequences of law enforcement sanctions on a corporate body, came not only from attorneys representing corporations but from courts as well.  It will be important to monitor how DOJ incorporates these new steps into its Principles for Prosecution of Business Organizations, and to be ready to point out circumstances where implementation imperils the protection of individual rights.

In-house counsel will no doubt be concerned about the significant costs trying to achieve “total” cooperation with a federal investigation will entail.  And the ever decreasing amount of daylight between the civil and criminal divisions will certainly trouble defense counsel, given the  increased leverage such arrangements could provide the government in negotiating settlements. 

The relationship between corporations under investigation on one hand, and their officers and employees on the other, has always been an uneasy one, requiring heightened awareness of the delineation of roles, loyalties and obligations of all involved.  This new policy shift may alter those relationships further, as the potential for pitting the two sides against each other appears to have been increased.

The most immediate and recognizable impact of this new policy statement will likely be delay in finalizing resolutions that are currently being negotiated, as department attorneys conduct the additional coordination required or encouraged by these six steps.  Counsel will need to be prepared to advocate so that hard-fought negotiations are not short-circuited, and investigations are not unnecessarily expanded.

Healthcare Survivor: Tribes Beginning To Form Alliances

As the healthcare industry feels a key wave of competition, major for-profit health insurance companies are beginning to fight for their immunity within the healthcare industry, avoiding ultimate elimination.  Aetna recently announced their acquisition of health insurer, Humana, strengthening their survival skills for this competition.  This $37 billion deal is the first of many expected mergers amongst United States healthcare giants.

Aetna and Humana have projected combined revenue of about $115 billion for 2015, which is a product of the company’s business with Medicare, Medicaid, Tricare, and other lucrative federal programs. The companies expect this deal to close in the second half of 2016, making them the second largest insurance company by sales, after UnitedHealth Group Inc.   The CEOs of both Aetna and Humana explained how the merger makes sense within today’s healthcare market, considering Aetna and Humana have ‘complimentary customers’.  Aetna handles a large and diverse commercial business while Humana handles an ever growing Medicare Advantage business.

While these acquisitions take place, there is worry for lack of innovation for new healthcare plans, along with questions of effectiveness when working with hospitals and doctors in order to deliver the most viable ways of health care.  Bruce D. Broussard, president and chief executive of Humana, stated, “These are the two most innovative companies in the health care sector today”. Aetna and Humana plan to pursue the manner in which insurers are cooperating with providers.  Mr. Bertolini also looks towards directing the company’s policy sales towards individuals, in addition to their traditional insurance provided for employers, as a direct result of the recent shift in the Medicare and Medicaid market.

Of course, the Securities and Exchange Commission, as well as the companies’ shareholders, must approve this acquisition, which can take several months.  Aetna shareholders are projected to own about 74 percent of the combined company, while Humana shareholders would own 26 percent.  Aetna plans to base their headquarters in Louisville, Ky., the current home of Humana, where they continue business with Medicare, Medicaid, and Tricare operations.  Industry insiders are watching for the next merger partners to image.